You cannot understand cryptocurrencies without understanding the blockchain technology that enables cryptocurrencies to exist, however, this is often where newcomers to crypto get lost or confused.
Read each bullet slowly:
- The blockchain is a network of anonymous computers around the world. They are called miners/validators.
- Miners are rewarded in cryptocurrency to solve mathematical equations.
- Every time a Bitcoin transaction is initiated, thousands of miners solve the equation, and it gets added to a block.
- Once a block is completed and all miners agree, it gets added to the blockchain and it moves and becomes a public record.
- A block can never ever be altered again once it is complete. It remains in the public record as true and accurate forever.
- Blockchain is the technology that allows us to send our coins around the world safely and securely.
- The blockchain is the “bank” on the internet, but instead of a few old men making decisions in a boardroom, it is done by super-smart strangers from all corners of the earth.
- Always remember, if you want to corrupt the blockchain, you need to find at least 1000 strangers you do not know, and then you need to bribe them so that they must all agree. Possible?
- I love using the train and track example. Think of the blockchain as the track and the coins/tokens are the trains. The trains cannot move without a track. And this is the safest track on earth because members of the maintenance team do not know each other. They just get rewarded for keeping the track in excellent condition.
- This is the true meaning of DECENTRALIZATION.
THE EVOLUTION OF BLOCKCHAINS
Satoshi designed the first blockchain when he designed Bitcoin. Nakamoto’s goal was to create digital money that would make online transactions between two strangers anywhere in the world possible without requiring a third party like a credit card company or a payment processor like PayPal in the middle.
This required a system that would eliminate a thorny issue called the “double spending” problem, where a person might use the same money more than once. The solution is a network that is constantly verifying the movement of Bitcoin. That network is the blockchain.
The blockchain idea has turned out to be a platform that a huge range of applications can be built on top of. It’s still a new and rapidly developing technology, but many experts have described blockchain’s potential to change the way we live and work as being similar to the potential public internet protocols like HTML had in the early days of the World Wide Web.